MARKET COMMENTARY | For Week Ending 7/29
Natural gas soars after the EIA reveals the lowest summer injection since 2006.
Natural gas retreated from a 4-week high achieved the prior Friday as updated weather forecasts pointed to lower gas-demand in the West in the coming weeks. The September contract fell 10.5 cents to $2.771 per MMBtu. Libya prepared to increase oil exports after a deal was reached to unblock three oil ports. West Texas Intermediate (WTI) oil plunged $1.54 lower to close at $40.06 per barrel on global supply glut concerns. Manufacturing growth softened during July, according to the Institute of Supply Management, and equity markets lost ground as a result.
Demand concerns continued to weigh on natural gas and prices slipped 3.8 cents lower to $2.733. The oil market officially entered into a bear market, with the September contract losing 21.8% since its peak in June. The front-month contract declined another 55 cents to close at $39.51. Equity markets operated in negative territory as investors sifted through a mixed bag of corporate earnings reports. Earnings have ranged from average to lackluster, with the tech industry revealing the best results.
Natural gas jumped 10.6 cents higher to $2.839 as traders positioned for a potentially very rare storage withdrawal reported the following day in the Energy Information Administration’s (EIA) weekly storage report. The EIA revealed an unexpected 1.4 Mb increase in domestic oil inventories. Even so, oil prices rebounded $1.32 to close at $40.83. The Dow Jones snapped its 7-day losing streak with support from higher oil prices and decent private payroll data.
Natural gas dipped 0.5 cents lower to $2.834 even after the EIA reported 6 Bcf draw from underground storage. This marked the first time there had been a summer storage withdrawal since 2006 and only the third time on record. The Bank of England cut interest rates for the first time in 7 years and announced a fresh round of stimulus to mitigate effects of Brexit. Crude traders keyed off the news and drove prices $1.10 higher to $41.93. Stocks traded in a mixed fashion, while the U.S. dollar inched higher.
Natural gas ended the week on a down note, falling 6.2 cents to $2.772. The September crude contract settled 13 cents lower at $41.80. Equity markets soared to near-record highs after the Labor Department reported a strong 255,000 jobs were created in the month of July. The dollar surged higher on hopes the jobs report would lead to a potential rate hike in the Federal Reserve’s September monetary policy meeting.
Crude traders will continue to look for signs of increased demand, while natural gas traders will focus intently on the week’s storage report.